by Costas Lapavitsas
The
agreement signed between Greece and the EU after three weeks of
lively negotiations is a compromise reached under economic duress.
Its only merit for Greece is that it has kept the Syriza government
alive and able to fight another day. That day is not far off. Greece
will have to negotiate a long-term financing agreement in June, and
has substantial debt repayments to make in July and August. In the
coming four months the government will have to get its act together
to negotiate those hurdles and implement its radical programme. The
European left has a stake in Greek success, if it is to beat back the
forces of austerity that are currently strangling the continent.
In
February the Greek negotiating team fell into a trap of two parts.
The first was the reliance of Greek banks on the European Central
Bank for liquidity, without which they would stop functioning. Mario
Draghi, president of the European Central Bank, ratcheted up the
pressure by tightening the terms of liquidity provision. Worried by
developments, depositors withdrew funds; towards the end of
negotiations Greek banks were losing a billion euros of liquidity a
day.
The
second was the Greek state’s need for finance to service debts and
pay wages. As negotiations proceeded, funds became tighter. The EU,
led by Germany, cynically waited until the pressure on Greek banks
had reached fever pitch. By the evening of Friday 20 February the
Syriza government had to accept a deal or face chaotic financial
conditions the following week, for which it was not prepared at all.
The
resulting deal has extended the loan agreement, giving Greece four
months of guaranteed finance, subject to regular review by the
“institutions”, ie the European Commission, the ECB and the IMF.
The country was forced to declare that it will meet all obligations
to its creditors “fully and timely”.
Furthermore,
it will aim to achieve “appropriate” primary surpluses; desist
from unilateral actions that would “negatively impact fiscal
targets”; and undertake “reforms” that run counter to Syriza
pledges to lower taxes, raise the minimum wage, reverse
privatisations, and relieve the humanitarian crisis.
In
short, the Syriza government has paid a high price to remain alive.
Things will be made even harder by the parlous state of the Greek
economy. Growth in 2014 was a measly 0.7%, while GDP actually
contracted during the last quarter. Industrial output fell by a
further 3.8% in December, and even retail sales declined by 3.7%,
despite Christmas. The most worrying indication, however, is the fall
in prices by 2.8% in January. This is an economy in a deflationary
spiral with little or no drive left to it. Against this background,
insisting on austerity and primary balances is vindictive madness.
The
coming four months will be a period of constant struggle for Syriza.
There is little doubt that the government will face major
difficulties in passing the April review conducted by the
“institutions” to secure the release of much-needed funds.
Indeed, so grave is the fiscal situation that events might unravel
even faster. Tax income is collapsing, partly because the economy is
frozen and partly because people are withholding payment in the
expectation of relief from the extraordinary tax burden imposed over
the last few years. The public purse will come under considerable
strain already in March, when there are sizeable debt repayments to
be made.
But
even assuming that the government successfully navigates these
straits, in June Greece will have to re-enter negotiations with the
EU for a long-term financing agreement. The February trap is still
very much there, and ready to be sprung again.
What
should we as Syriza do and how could the left across Europe help? The
most vital step is to realise that the strategy of hoping to achieve
radical change within the institutional framework of the common
currency has come to an end. The strategy has given us electoral
success by promising to release the Greek people from austerity
without having to endure a major falling-out with the eurozone.
Unfortunately, events have shown beyond doubt that this is
impossible, and it is time that we acknowledged reality.
For
Syriza to avoid collapse or total surrender, we must be truly
radical. Our strength lies exclusively in the tremendous popular
support we still enjoy. The government should rapidly implement
measures relieving working people from the tremendous pressures of
the last few years: forbid house foreclosures, write off domestic
debt, reconnect families to the electricity network, raise the
minimum wage, stop privatisations. This is the programme we were
elected on. Fiscal targets and monitoring by the “institutions”
should take a back seat in our calculations, if we are to maintain
our popular support.
At
the same time, our government must approach the looming June
negotiations with a very different frame of mind from February. The
eurozone cannot be reformed and it will not become a “friendly”
monetary union that supports working people. Greece must bring a full
array of options to the table, and it must be prepared for
extraordinary liquidity measures in the knowledge that all
eventualities could be managed, if its people were ready. After all,
the EU has already wrought disaster on the country.
Syriza
could gain succour from the European left, but only if the left
shakes off its own illusions and begins to propose sensible policies
that might at last rid Europe of the absurdity that the common
currency has become. There might then be a chance of properly lifting
austerity across the continent. Time is indeed very short for all of
us.
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